The Ministry of Treasury and Finance has issued a new announcement over its website in relation to the restrictions imposed in 2018 regarding the contracts denominated in foreign currency or contracts bearing foreign currency indexed prices.
By virtue of the Presidential Decree No. 85, published in the Official Gazette dated September 12, 2018, the Decree No. 32 on Protection of the Value of the Turkish Currency (the “Decree No. 32”) has been amended and as a result of which, individuals and legal entities resident in Turkey has been prohibited from entering into contracts with foreign currency or foreign currency indexed prices; save for certain exceptions. The same restriction has also envisaged that the foreign currency or foreign currency indexed prices in existing contracts shall be converted into Turkish Lira. The applicable exceptions have been introduced and regulated under Communique No. 2008-32/34 regarding the Decree No. 32 (the “Communique”).
Under the Communique and other applicable legislation, the method of conversion of the contract prices to Turkish Lira in case parties to a contract cannot mutually agree thereon and the rate of increase to be applied to the prices converted to Turkish Lira in the residential and business lease contracts during the two-year transition period are regulated and determined. Accordingly, upon the expiry of the two-year transition period, if the parties cannot still mutually agree on the rate of increase to be applied to the Turkish Lira contract price, then such rate will be determined in accordance with and subject to the limits set forth under Article 344 of the Code of Obligations.
Pursuant to the announcement, Ministry of Treasury and Finance has disclosed to the public information that following the expiry of the two-year transition period, contract prices of the contracts that fall under the scope of the restrictions cannot be reimplemented in foreign currency or foreign currency indexed prices and detection of any implementation in breach thereof may result in application of sanctions in accordance with the foreign exchange legislation.
This note is intended for general information purposes only and should not be relied upon as a source of legal advice. Independent legal advice should be sought before taking any action based on information contained within this note for each particular case.